U.S. banks can match China’s for corruption

Opinion: Maybe we should look in the mirror before pointing the finger at scandals

By

DavidWeidner

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SAN FRANCISCO (MarketWatch) — Tian xià wu ya yi yàng hei.

I may not have the translation exactly correct, but in Mandarin, loosely, the expression means “in the whole world, all crows are black.”

The proverb isn’t about crows. Crows are a metaphor for bad guys. And the upshot is this: we may judge different cultures for their failings, but we have failings too. We all have our crows. Everywhere they are black.

This idea of equanimity in how we are all flawed came to mind as the scandal escalates over banks hiring people connected to China’s political and powerful elite. We tend to look at these transgressions — if they can be called that — and pass judgment. Perhaps we say “look at the awful Chinese political system,” or “look at the terrible behavior of U.S. banks.”

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The office of the locally incorporated J.P. Morgan Chase Bank in Beijing .

In case you missed it, or are a little fuzzy on the details, several foreign banks are being investigated for hiring well-connected Chinese, or “princelings.” They may be the son, daughter cousin of an official or the official him- or herself.

On Monday, UBS AG
UBS, -0.60%suspended two executives, including its top IPO banker in Asia, in an internal probe into the hiring of an employee related to the head of a Chinese listing hopeful, according to the Wall Street Journal, which cited anonymous sources. UBS declined comment.

And the same day came revelations that the family friend of an important Chinese regulator — who had say over the bank’s ability to pursue insurance business in the country — was given an audience with J.P. Morgan Chase & Co.
JPM, -0.45%
CEO Jamie Dimon in June 2012. The friend reportedly received a special internship with the bank and then became a full-time employee.

“Our CEO played no role in the hiring decision, did not weigh in, and did not follow up,” Joseph Evangelisti, a bank spokesman, said in a statement. “It is his normal practice to pass on referrals without advice to those involved in hiring.”

The dust-ups at UBS and J.P. Morgan were just the latest in the saga where U.S. financial firms may or may not have used hiring friends or relatives of powerful officials as a way of influencing business decisions in the banks favor.

OK. Let’s assume they did. So what?

This is how business is done in China. And it’s not that different from how it’s done here, even though many of us believe our way is the superior way.

In the same index the U.S. rank is 19th. Maybe it shouldn’t be. After all, this is a perception index. People think we’re more on the up and up.

In the United States, financial firms use an equally questionable practice of hiring regulators or losing top executives to regulatory roles.

For instance, between 2006 and 2010, 219 former Securities and Exchange Commission employees filed 789 post-employment statements indicating their intent to represent an outside client before the commission, according to the Project on Government Oversight. POGO also found “131 entities providing legal, accounting, consulting, and other services that were identified as new employers in the statements.”

And many have questioned how much of a priority can it be for the SEC chairman to rid the system of this problem when she not only spent the last part of the decade defending Wall Street firms against regulators, but her husband is a corporate lawyer who does the same for other corporations.

Consider also that 127 current or former members of the health, education and labor committees in Congress either have worked, or are now working, in the industries they were overseeing as lawmakers, according to OpenSecrets.org.

The SEC and Congress aren’t the only places where the revolving door swings. Robert Rubin, the former U.S. Treasury Secretary, joined Citigroup Inc.
C, +0.14%
in 2000 and collected $115 million as the bank took $45 billion in taxpayer-funded bailouts and $300 billion in guarantees on assets. The most recent former Treasury secretary, Timothy Geithner, left to join the private equity firm Warburg Pincus. as new rules were being crafted on the industry.

At least China is doing something about their issues. A report in 2010 by the Anti-Corruption and Governance Research Center at Tsinghua University found that in just 11 months of that year the government’s anti-corruption division investigated 119,000 graft cases, resulting in 113,000 people being punished.

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